REFILE-Nikkei eases as euro fears spur profit taking

* Hitachi sags after cutting forecast
* Japan Airlines gains, f'cast hike offsets Dreamliner
losses
* Fast Retailing weighs after poor January sales
By Sophie Knight
TOKYO, Feb 5 Japan's Nikkei share average
dropped in early trade on Tuesday as investors took signs of
strife in peripheral euro zone countries as a cue to lock in
profits following five straight days of gains.
Hitachi Ltd was in the firing line, shedding 5.6
percent after the industrial machinery firm sliced 13 percent
off its full-year operating profit outlook, citing sluggish
demand in Europe and a slowdown in emerging markets.
But Japan Airlines Co Ltd was in favour, jumping as
much as 7.6 percent to its highest level since it went public
last September, after the airline hiked its operating profit
forecast by 12.7 percent to 186 billion yen ($2 billion) for the
year to March 31.
The airline estimated the impact on its earnings from the
grounding of Boeing's Dreamliner jet at around 700
million yen ($7.55 million) for the rest of this fiscal year,
but said it will discuss compensation with Boeing.
The Nikkei lost 1 percent to 11,151, backing away
from a 33-month closing high of 11,260.35 hit on Monday, after
concern about the euro zone debt crisis flared due to calls for
the Spanish prime minister to resign due to a corruption scandal
and news of a probe of alleged misconduct involving an Italian
bank three weeks before national elections.
"There will only be a spurt of profit-taking in reaction to
this kind of news because it's just one small piece of a very
long and drawn-out crisis," said Toshiyuki Kanayama, senior
market analyst at Monex.
"But the U.S. fell off highs and the Nikkei is also begging
for a fall after rising for five straight days."
Profit-taking meant some of the most sluggish stocks on
Tuesday morning were those that have seen sharp gains over the
past 2-1/2 months on hopes that Prime Minister Shinzo Abe's
brand of aggressive monetary and fiscal policy will reinvigorate
the economy.
The real estate sector, which has soared around 31
percent since mid-November, dropped 2.5 percent, while the
insurers' sub-index, which shot up 46 percent over the
past 2-1/2 months, lost 2 percent on Tuesday morning.
"The market has been moving on expectation or speculation for
months, but investors might start looking at the here-and-now
soon," said Ryota Sakagami, chief strategist of equity research
at SMBC Nikko Securities.
"Companies that would benefit from a return to inflation -
insurance, real estate and banks - might cool down because that
hasn't actually happened yet, while the winners from a weaker
yen will remain in focus because that's very real," he added.
The yen moved further off a fresh 33-month low hit on Monday
morning of 93.185 against the dollar, to 92.46 by Tuesday
morning. The Japanese currency's 14 percent slide since
mid-November has propelled up exporters, whose overseas revenues
will be swollen by a softer yen.
While investors are optimistic about future profits,
weakness in the yen came too late to much improve results from
the last quarter, with about two-thirds of the 88 Nikkei
companies that have reported so far this earnings season missing
analysts' estimates, according to Thomson Reuters Starmine.
Sakagami of SMBC Nikko Securities said companies with a
higher proportion of sales from the domestic market may be
somewhat sidelined as demand slows at home and signs of
inflation still seem a long way off.
Index heavyweight Fast Retailing Ltd, the operator
of the Uniqlo clothing chain, said domestic sales fell 5.5
percent in January from a year earlier, citing fewer weekend
days in the month. Its stock fell 2.3 percent,
taking 23.1 points off the benchmark.
The broader Topix edged down 0.4 percent to 951.91.